The Four Seasons of Financial Planning

As winter comes to an end and we head into the spring/summer, a parallel can be drawn between the seasons of weather and the seasons of money. There are four financial seasons of life that include accumulation, preservation, distribution and succession. Approaching your finances with these four seasons in mind can help to keep you on track toward reaching your long-term financial goals.

“Accumulation” season is when you work hard, save, invest and grow. The “preservation” season is the time to protect your accumulation so you can count on it in retirement. The next season, “distribution,” is where you structure your finances to provide an income to last throughout your retirement years. The final financial season is “succession,” the time when what you’ve amassed is passed on to your heirs or loved ones, in the most tax efficient manner.

Understanding the four “financial seasons” of life can help define where you are today and the steps you will need to take in the future. Knowing specifically how to handle your money from “season to season” will determine whether you meet or exceed your long-term financial goals.

1) Accumulation Season – ages 20 to 55

Typically the longest financial season and time spent accumulating wealth and sets the foundation for your entire life. It’s important during this stage to set your financial goals and save and invest consistently. Take advantage of employer-sponsored retirement plans, open a brokerage account and work to keep unnecessary fees and taxes to a minimum.

2) Preservation Season – ages 55 to 65

During this time, it’s key to protect the money you’ve worked hard to accumulate. Typically, people who fall within this age bracket need to become more conservative with their investment dollars. Seek safer alternatives that still provide a rate of return. Look at your fee structure from investments in your portfolio and see where you can transition some of your more expensive investments to less expensive alternatives.

3) Distribution Season – ages 65+

Consider your tax liabilities in retirement and the order from which you withdraw from your retirement savings. Many people are blessed to have a 20 to 30 year retirement.

4) Succession Season – after your death

What do you want to happen to your savings and assets after your passing? Without proper planning, it can be eaten up by taxes and fees rather than given to your intended heirs. Your legacy will depend on how well you planned your finances in each of the previous seasons as well as what estate planning you have prepared in advance.

Each financial season builds on the one before it. By planning each season carefully, in advance, it can help you get the most out of your financial life.